U.S. Ports Receive Better Outlook from Moody’s

Moody’s Investors Service has just changed its outlook for United States ports to “stable” from “negative”, in response to the continued recovery of container volumes.

The firm expects U.S. container volumes to increase two to three percent in 2015, based on growth in the nation’s economy. The steady (albeit slow) recovery in container volumes is about to enter its fifth consecutive year, following declines due to the recession. The growth of container volumes supports port credit strength by upping revenues from the volume-based fees charged to shipping lines.

Expressed Moody’s Analyst, Myra Shankin, “Our new stable outlook is based on the view that the continuing recovery in U.S. container-volume growth is sustainable and that business conditions for global shipping lines, which drive cargo volume, have stabilized.”

At the same time, the business conditions for global shipping lines have stabilized, and increases in shipping capacity will eventually drop in 2016, helping to support prices.

According to Shankin, “Cost reductions will help drive EBITDA growth for shipping lines in 2014 and 2015. Since the shipping lines ultimately drive port cargo and revenues, we expect less pressure on shipping lines will translate into less pressure on the ports.”

Moody’s expects the gap between the “winners” and “losers” among our nation’s ports to get wider, as well as for the cargo competition to ramp up. Container volumes will likely shift away from ports unable to take on larger vessels, or ports with disadvantageous locations.

The investment firm does not expect the Panama Canal expansion to create a major shift in cargo routes, however. They expect that manufacturers will continue to ship time-sensitive, high-value cargo from Asia using the established, efficient route through West Coast ports.

The outlook from Moody’s reflects their expectations for the business conditions in the industry over the next year to 18 months; the outlook has been negative since 2009.